Reykjavík is believed to be the location of the first permanent settlement in Iceland, which Ingólfur Arnarson is said to have established around AD 870. Until the 18th century, there was no urban development in the city location. The city was founded in 1786 as an official trading town and grew steadily over the next decades, as it transformed into a regional and later national center of commerce, population, and governmental activities. It is among the cleanest, greenest, and safest cities in the world.[2][3][4]

The first permanent settlement in Iceland by Norsemen is believed to have been established in Reykjavík by Ingólfur Arnarson from Norway around AD 870; this is described in Landnámabók, or the Book of Settlement. Ingólfur Arnarson is said to have decided the location of his settlement using a traditional Viking method; he cast his high seat pillars (Öndvegissúlur) into the ocean when he saw the coastline, then settled where the pillars came to shore. Steam from hot springs in the region is said to have inspired Reykjavík's name, which loosely translates to Smoke Cove (the city is often referred to as the Bay of Smokes or Bay of Smoke)[5] The original name was Reykjarvík with an additional "r" that vanished around 1300.[citation needed]

Reykjavík is not mentioned in any medieval sources except as farmland, but the 18th century saw the beginning of urban concentration there. The Danish rulers of Iceland backed the idea of domestic industry in Iceland that would stimulate much-needed progress on the island.[citation needed] In 1752, the King of Denmark, Frederik V, donated the estate of Reykjavík to the Innréttingar Corporation; the name comes from Danishindretninger, meaning institution. The leader of this movement was Skúli Magnússon. In the 1750s several houses were built to house the wool industry that was to be Reykjavík's most important employer for a few decades and the original reason for its existence. Other crafts were also practised by the Innréttingar, such as fisheries, sulphur mining, agriculture, and shipbuilding.[citation needed]

The Danish Crown abolished monopoly trading in 1786 and granted six communities around the country an exclusive trading charter, Reykjavík was one of them and the only one to hold on to the charter permanently. The year 1786 is regarded as the date of the city's founding; its 200th anniversary was celebrated in 1986. Trading rights were still limited to the subjects of the Danish Crown, and Danish traders continued to dominate trade in Iceland. Over the following decades, their business in Iceland expanded. After 1880, free trade was expanded to all nationalities and the influence of Icelandic merchants started to grow.

Icelandic nationalist sentiment gained influence in the 19th century and the idea of Icelandic independence became widespread. Reykjavík, as Iceland's only city, was the melting pot of such ideas. Advocates of an independent Iceland realized that a strong Reykjavík was fundamental to that objective. All the important events in the history of the independence struggle are important for Reykjavík as well. In 1845, Alþingi, the general assembly formed in AD 930, was re-established in Reykjavík; it had been suspended a few decades earlier when it was located at Þingvellir. At the time it functioned only as an advisory assembly, advising the King about Icelandic affairs. The location of Alþingi in Reykjavík effectively established the city as the capital of Iceland.

In 1874 Iceland was given a constitution; with it, Alþingi gained some limited legislative powers and in essence became the institution that it is today. The next step was to move most of the executive power to Iceland: Home Rule was granted in 1904 when the office of minister for Iceland was established in Reykjavík. The biggest step towards an independent Iceland was taken on 1 December 1918 when Iceland became a sovereign country under the Crown of Denmark, the Kingdom of Iceland.

In the 1920s and 1930s most of the growing Icelandic fishing trawler fleet sailed from Reykjavík and salt-cod production was the main industry, but the Great Depression hit Reykjavík hard with unemployment and labour union struggles that sometimes became violent.

On the morning of 10 May 1940, following the German occupation of Denmark and Norway on 9 April 1940, four British warships approached Reykjavík and anchored in the harbour. In a few hours, the alliedoccupation of Reykjavík was complete. There was no armed resistance, and taxi and truck drivers even assisted the invasion force, which initially had no motor vehicles. The Icelandic government had received many requests from the British government to consent to the occupation, but it always declined on the basis of the Neutrality Policy. For the remaining years of World War II, British and later American soldiers occupied camps in Reykjavík, and the number of foreign soldiers in Reykjavík became about the same as the local population of the town. The Royal Regiment of Canada (RREGTC) formed part of the garrison in Iceland during the early part of the war.

The economic effects of the occupation were positive for Reykjavík: the unemployment of the depression years vanished and construction work began. The British built Reykjavík Airport, which is still in service today, mostly serving domestic flights. The Americans, meanwhile, built Keflavík Airport, situated 50 km (31 mi) west of Reykjavík, which would become Iceland's primary international airport. In 1944 the Republic of Iceland was founded and a president, elected by the people, replaced the King; the office of the president was placed in Reykjavík.

In the post-war years the growth of Reykjavík accelerated. A mass exodus from the rural countryside began, largely due to improved technology in agriculture that reduced the need for manpower, and because of the population boom resulting from better living conditions in the country. A once primitive village was rapidly transformed into a modern city. Private cars became common and modern apartment complexes rose in the expanding suburbs. Much of Reykjavík lost its village feel. In 1972, Reykjavík hosted the world chess championship between Bobby Fischer and Boris Spassky.

Reykjavík has in the last three decades become a significant player in the global community. The 1986 Reykjavík Summit between Ronald Reagan and Mikhail Gorbachev underlined Reykjavík's new-found international status. Deregulation in the financial sector and the computer revolution of the 1990s again transformed Reykjavík. The financial sector and information technology are now significant employers in the city. The city has fostered some world-famous talents in recent years, such as Björk, Ólafur Arnalds and bands Múm, Sigur Rós, and Of Monsters and Men, and poet Sjón.

Reykjavík is located in southwest Iceland. The Reykjavík area coastline is characterized by peninsulas, coves, straits, and islands.

During the Ice Age (up to 10,000 years ago) a large glacier covered parts of the city area, reaching as far out as Álftanes. Other parts of the city area were covered by sea water. In the warm periods and at the end of the Ice Age, some hills like Öskjuhlíð were islands. The former sea level is indicated by sediments (with clams) reaching (at Öskjuhlíð, for example) as far as 43 m (141 ft) above the current sea level. The hills of Öskjuhlíð and Skólavörðuholt appear to be the remains of former shield volcanoes which were active during the warm periods of the Ice Age.

After the Ice Age, the land rose as the heavy load of the glaciers fell away, and began to look as it does today.

The capital city area continued to be shaped by earthquakes and volcanic eruptions, like the one 4,500 years ago in the mountain range Bláfjöll, when the lava coming down the Elliðaá valley reached the sea at the bay of Elliðavogur.

The largest river to run through Reykjavík is the Elliðaá River, which is non-navigable. It is one of the best salmon fishing rivers in the country. Mount Esja, at 914 m (2,999 ft), is the highest mountain in the vicinity of Reykjavík.

The city of Reykjavík is mostly located on the Seltjarnarnes peninsula, but the suburbs reach far out to the south and east. Reykjavík is a spread-out city: most of its urban area consists of low-density suburbs, and houses are usually widely spaced. The outer residential neighbourhoods are also widely spaced from each other; in between them are the main traffic arteries and a lot of empty space.

Panorama of Reykjavík seen from Perlan with the mountains Akrafjall (middle) and Esja (right) in the background

Temperatures very rarely drop below −15 °C (5 °F) in the winter. This is because the Icelandic coastal weather in winter is moderated by the warm waters of the Gulf Stream. The climate is subpolar oceanic (Koppen: Cfc ), and the city is on the northern edge of the temperate zone. The city's coastal location does make it prone to wind, however, and gales are common in winter. Summers are cool, with temperatures fluctuating between 10 and 15 °C (50 and 59 °F), sometimes exceeding 20 °C (68 °F). Reykjavík is not a particularly wet city, but it nevertheless averages 148 days with measurable precipitation every year. Droughts are uncommon although they occur in some summers. In the summer of 2007, no rain was measured for one month. Spring tends to be the sunniest season, May particularly. Annual sunshine hours in Reykjavík are around 1,300,[6] which is comparable with other places in Northern and North-Eastern Europe, such as Glasgow, Scotland. The highest ever recorded temperature in Reykjavík was 26.2 °C (79 °F), recorded on 30 July 2008, while the lowest ever recorded temperature was −24.5 °C (−12 °F), recorded on 21 January 1918.[7] The temperature has not dropped to below −20 °C (−4 °F) since 30 January 1971.[8]

The Reykjavik City Council governs the city of Reykjavík according to law number 45/1998[10] and is directly elected by those aged over 18 domiciled in the city. The council has 15 members who are elected using the open list method for 4 year terms.

The council selects members of boards, and each board controls a different field under the city council's authority. The most important board is the City Board that wields the executive rights along with the City Mayor. The City Mayor is the senior public official and also the director of city operations. Other public officials control city institutions under the mayor's authority. Thus the administration consists of two different parts:

The political power of City Council cascading down to other boards

Public officials under the authority of the city mayor who administer and manage implementation of policy.

The Independence Party had overall control of the city council from the party's establishment in 1929 until 1978, when they narrowly lost their overall majority. From 1978 to 1982 the People's Alliance, the Social Democratic Party and the Progressive Party formed the majority of the council.
The Independence Party regained overall control in the 1982 elections, and held it until 1994. At that election its opponents had formed an alliance, called Reykjavíkurlistinn, or the R-list. That alliance had overall control until 2006. In the May 2006 elections the electorate could choose between five different parties, three of which had formed the R-list. The Independence Party obtained 7 members of the council, and thus failed to gain overall control, but together with the Progressive Party, and its one council member, they were able to form a new majority in the council which took over in June 2006. In October 2007 a new majority was formed on the council, consisting of members of the Progressive Party (1), the Social Democratic Alliance (4), the Left-Greens (2) and the F-list (1) (liberals and independents), after controversy regarding REI, a subsidiary of OR, the city's energy company. However three months later the leader of the F-list formed a new majority together with the Independence Party. Ólafur F. Magnússon, the leader of the F-list, was elected mayor on 24 January 2008, and in March 2009 the Independence Party was due to appoint a new mayor. This changed once again on 14 August 2008 when the fourth majority of the season was formed, when the Independence Party and the Progressive party took over again, with Hanna Birna Kristjánsdóttir becoming mayor. The latest election in May 2010 saw a new political party, The Best Party, win the most seats on the council.[11]

The mayor is appointed by the city council; usually one of the council members is chosen but they may also appoint a mayor who is not a member of the council.

The post was created in 1907 and advertised in 1908. Two applications were received, from Páll Einarsson, sheriff and town mayor of Hafnarfjörður and from Knud Zimsen, town councillor in Reykjavík. Páll was appointed on 7 May and was mayor for six years. At that time the city mayor received a salary of 4500 ISK per year and 1500 ISK for office expenses. The current mayor is Dagur B. Eggertsson.

Reykjavík is the largest and most populous settlement in Iceland. Present-day Reykjavík is a city with people from at least 100 countries. The most common ethnic minorities are Poles, Lithuanians, and Danes. In 2009, foreign-born individuals made up 8% of the total population.[12] Children of foreign origin, many of whom are adopted, form a more considerable minority in the city's schools: as many as a third in places.[13] The city is also visited by thousands of tourists, students and other temporary residents, at times outnumbering natives in the city centre.[14]

Borgartún is the financial centre of Reykjavík, hosting a large number of companies and three investment banks.

Old whaling ships Hvalur 6, 7, 8 and 9

Reykjavík has been at the centre of Iceland's economic growth and subsequent economic contraction over the last decade,[which?] a period referred to in foreign media as the "Nordic Tiger" years,[16][17] or "Iceland's Boom Years".[18] The economic boom led to a sharp increase in construction, with large redevelopment projects such as Harpa concert hall and conference centre and others.

Per capita car ownership in Iceland is among the highest in the world at roughly 522 vehicles per 1,000 residents,[19] though Reykjavík is not severely affected by congestion. Several multi-lane highways (mainly dual carriageways) run between the most heavily populated areas and most frequently driven routes. Parking spaces are also plentiful in most areas. Public transportation consists of a bus system called Strætó bs. Route 1 (the Ring Road) runs through the city outskirts and connects the city to the rest of Iceland.

Reykjavík Airport, the second largest airport in the country (after Keflavík International Airport), is positioned inside the city, just south of the city centre. It is mainly used for domestic flights, as well as flights to Greenland and the Faroe Islands. It was built there by the British occupation force during World War II, when it was on the outskirts of the then much smaller Reykjavík. Since 1962 there has been some controversy regarding the location of the airport, since it takes up a lot of valuable space in central Reykjavík.

Reykjavík has two seaports, the old harbour near the city centre which is mainly used by fishermen and cruise ships and Sundahöfn in the east city which is the largest cargo port in the country.

Volcanic activity provides Reykjavík with geothermal heating systems for both residential and industrial districts. In 2008, natural hot water was used to heat roughly 90% of all buildings in Iceland.[20] Of total annual use of geothermal energy of 39 PJ, space heating accounted for 48%.

The "Culture House" was opened in 1909 and has a number of important exhibits. Originally built for to house the National Library and National Archives and also previously the location of the National Museum and Natural History Museum, in 2000 it was re-modelled to promote the Icelandic national heritage. Many of Iceland's national treasures are on display, such as the Poetic Edda, and the Sagas, in their original manuscripts. There are also changing exhibitions on various topics.[22]

Reykjavík is famous for its weekend nightlife.[citation needed] Icelanders tend to go out late, so bars that look rather quiet can fill up suddenly—usually after midnight on a weekend.

Alcohol is relatively expensive at bars. People tend to drink at home before going out. Beer was banned in Iceland until 1 March 1989, but has since become popular among many Icelanders as their alcoholic drink of choice.[23]

There are over 100 different bars and clubs in Reykjavík;[citation needed] most of them are located on Laugavegur and its side streets. It is very common for an establishment that is a café before dinner to turn into a bar in the evening. Closing time is usually around 4:30 am at weekends and 1 am during the week. The Iceland Airwaves music festival is annually staged in October.

The arrival of the new year is a particular cause for celebration to the people of Reykjavík. Icelandic law states that anyone may purchase and use fireworks during a certain period around New Year's Eve. As a result, every New Year's Eve the city is lit up with fireworks displays.